The first half of 2016 has been the second highest demand for gold on record. Increased concerns over political and economic uncertainty saw Investors flock to the precious metal. So where will it go next?

Global gold demand reached 2,335 tonnes (t) in the first half of 2016 with investment reaching record H1 levels, 16 percent higher than the previous record in H1 2009, according to the World Gold Council’s latest Gold Demand Trends report.

The second quarter of 2016 continued in the same vein as the first quarter this year with overall gold demand growing to 1,050t, up 15 percent from the 2015 figure of 910t, boosted by considerable and consistent investment demand.

China and India Fall

Reacting to the negative interest rate environment, coupled with several high profile terrorist attacks, and confused political directions, demand has come not from the perennial wealth hubs in Asia, but from the West.

A cause and effect of the growth in investment demand was a 25 percent rise in the US$ gold price, the strongest H1 price gain since 1980. This contributed to lacklustre consumer purchasing, particularly in price sensitive markets. While there were increases for jewellery demand in the US and Iran the customary powerhouses of China and India saw drops in the second quarter

Demand From The West

Indian demand was further impacted by rural incomes remaining under pressure, as well as the government’s decision to increase excise duty. Meanwhile, China faced a challenging quarter against a relatively soft economic backdrop and the implementation of new hallmarking legislation in May.

«The strength of this quarter’s demand means that the first half of 2016 has been the second highest for gold on record, weighing in at 2,335t. The global picture for gold is dominated by considerable and continued investment demand driven by the West as investors rebalance their investments in response to the ever-expanding pool of negative yielding government bonds and heightened political and economic uncertainty,» said Alistair Hewitt, Head of Market Intelligence at the World Gold Council.